E-invoicing hasn’t quite hit its high in the U.S., but it’s surely on its way. Digitalization is the future, and the move to e-invoicing plays a huge role in the transition, from complying with new guidelines and business practices to adopting new technologies to support everything. It’s quite a big change, and it’s one that has been going on in Europe for years. So regardless of whether you’re located in Europe and need to get started with e-invoicing or you’re located in the U.S. and just want to get a feel for what’s to come, here’s an overview of the basics.
As a B2B or B2G supplier of goods or services, the act of sending an invoice is nothing new; it’s the way you ensure that you get paid for the goods or services you provide.
What may be new for you, however, are the changes to your customers' billing requirements. If you haven't had to deal with these changes yet (or are still putting it off), just know that you won’t be able to avoid them for very long!
History of the Invoice
Let's start at the beginning: we started creating invoices because of the need to record transactions of items that were sent and received. The first (extremely basic) invoices discovered are over 7000 years old and were written on stone, clay, and even bone.
Over time, of course, invoices evolved to paper, and in 1981 the first invoice was generated by a computer. Throughout history, the invoice has gone through several transformations and improvements.
It’s likely that you’re currently used to sending a PDF invoice via computer by email or through your accounting system. The logical next step is the e-invoice.
What is an E-Invoice?
Like a PDF, an e-invoice is a digital file, but that doesn't make a PDF an e-invoice!
An e-invoice is a structured file where each part has a fixed location that’s determined by the standard used. Because of the structure, an e-invoice can be automatically exchanged electronically between different systems.
The e-invoice must contain the same information as any other invoice (and any additional information requested by your customer).
How Do I Create an E-Invoice?
There are several ways to create an e-invoice. It all depends on the invoicing requirements of your customer and the options your customer offers. But it’s also influenced by the capabilities of your company and the number of invoices you send.
Directly From Your Accounting or ERP System
One option you have available is to choose to create a direct link between your system and your customer's system. EDI (Electronic Data Interchange) is the software that makes this direct link possible.
With EDI, no human intervention or paper is needed for the exchange to take place. As you can imagine, when a business is exchanging many documents every day, this saves a lot of time and paper, and the benefits do not stop there.
EDI does come with a price tag, however, which is why you should tailor your EDI system in terms of how many documents your business exchanges each month.
From PDF to E-Invoice
Are you still tied to sending your invoices in PDF format? Then you can choose to purchase software that converts your 'born digital' PDF invoices to e-invoices (such as PDF-2-FLOW).
‘Born digital’ means that the PDF was generated by an accounting system, recognizable by the fact that you can select the text in the file. A scan or OCR-created PDF are not suitable. These are usable in theory but can be inaccurate and therefore are not the best option for error-free transactions.
As mentioned earlier, there are costs involved in purchasing this software. So you’ll have to consider whether it’s necessary for your business right now; if you only exchange a few documents a month, you may not need to worry about switching to e-invoicing.
Using WebEDI or Your Customer's E-Invoicing Portal
If you only send a few PDF invoices per year, you’re probably not eager to invest in an EDI solution or software to convert PDFs.
For these suppliers, a supplier portal (or e-invoicing portal) is often offered. This is also called WebEDI and allows suppliers to manually enter invoices online into a portal. These are then converted to the buyer's desired e-invoice format and sent to the buyer's system without human intervention.
The use of such a portal is free of charge for the supplier; in fact, the portal is operated by the buyer and this organization therefore owns the e-invoicing portal.
An Example to Clarify:
The Municipality of Amsterdam purchases the EDI portal software from a service provider (like TIE Kinetix). This software is then owned by the municipality which uses it as its e-invoicing portal for suppliers who do not have the resources or ability to purchase an EDI solution.
How Do I Send an Invoice Through Peppol?
If you’re in Europe, you may find that your customer requests that you send your invoice through Peppol. However, Peppol is a network that is becoming increasingly popular around the world. Many companies and governments are connected to the network. Once you have access to this network you can exchange invoices with all connected parties in a very secure way.
All invoices sent via Peppol must comply with the Peppol format: Peppol BIS Billing 3.0. To access the Peppol network, you need a Peppol Access Point (such as TIE Kinetix). Access points are (usually) service providers that have been screened by the umbrella organization OpenPeppol to meet several quality requirements.
A lot has changed since the first invoice was created and it will only continue to evolve in the future. Similarly, the e-invoice has been around for a while now and though it started as a solution for larger businesses, it’s now becoming increasingly embraced by smaller organizations as well. Now, as Peppol expands throughout the world, organizations in the United States have a clearer idea of what e-invoicing requirements may look like soon. This is partly due to the different options for sending e-invoices where each is suited to a particular situation. Now it’s accessible and easy for anyone to implement e-invoicing into their business.